FSU Editorial: "Predictions for 2008" by Robert Ross 12/31/2007

PREDICTIONS FOR 2008
by Robert Ross
December 31, 2007

If you thought 2007 was interesting, with . . . Paris Hilton going to jail, and . . . ah . . . hmm . . . well, 2008 is going to be one for the history books. In 2008, we're going to see some rather dramatic events, from the elections, to changes in the economy, to international shifts in power. So, without further ado, let's get started.

My predication model is based on my own life observations, a lot of reading, the Internet, and the quote by Mark Twain that says "History may not repeat itself, but it does rhyme a lot."

Look to the 1970s

The presidential election is coming in November 2008. The nation appears battle fatigued, easily distracted, and definitely divided; very much like the lead up to the 1976 election. In 1976, with the end of the Viet Nam war, out of control Federal budgets and a nation seeking change, the pendulum swung from one end of the political spectrum to the other. Today, the nation wants change. This coming election may not automatically mean a change in political parties, but I think we can expect the election to reflect a dramatic shift in focus, direction and leadership style.

The economy in 2008 in many ways, will mirror the 1970's, with inflation being the primary theme. According the government, inflation is running at about 2% per year. For those who saved their Thanksgiving dinner bills for 2007 and compared them with 2006, they probably saw a rather noticeable increase in food prices. John Williams from www.shadowstats.com has spent years studying government statistics - what is being reported - and not - and how it’s being reported. According to Mr. Williams, inflation is currently running at about 10%. With the falling the dollar, and fewer foreigners willing to finance our debt (buying our Treasury Bills), look for the printing presses in Washington to be working overtime in 2008. Translation: expect inflation to grow at an ever increasing rate.

The U.S. Dollar

The fundamentals for the U.S. dollar are poor. We've gone from being the largest creditor nation in the world to being the largest debtor nation in the world. With a growing national debt, inflation on the rise, commitments to entitlement programs that cannot be met, the dollar will reflect an economy that appears headed for some type of "day of reckoning." In 2008 we probably won't see that "day" but will more than likely see the dollar hit 70 on the USD index.

As a result of inflation and the falling dollar, the price of gold, an economic barometer and leading indicator of inflation, will continue its march toward $1000 an ounce; with $900 an ounce a slam dunk in 2008. Oil prices, a reflection of the weakening dollar, will remain high in 2008, with $4.00 a gallon at the gas pump a distinct possibility.

Real Estate

The U.S. housing market will be anemic throughout 2008. According to Economist Nouriel Roubini (www.rgemonitor.com) "this is the worst housing recession since the Great Depression and getting worse . . ." With housing inventories as large as they currently are, and sellers unwilling to "sell at any price," the housing market will be a slow grinding drag on the economy in 2008.

Internationally

Internationally, China is set to showcase itself in the 2008 Olympics. China's growth rate is more than 10% a year with no sign of slowing down. This incredible growth rate is spurred on by the United States. We shop, they produce. In spite of a trade war mentality coming from some members of Congress, this symbiotic relationship will be maintained until the Olympics have been written into the history books.

In 1979 Russia, sensing a weak and divided America, invaded Afghanistan. Vladimir Putin, Russia's current leader is part of that old KGB regime. His goal is to reestablish Russia's sphere of influence over the old Soviet Union states. And, as of late, he's been flexing his muscle. According to www.Stratfor.com, Russia is focusing on the Baltics (Lithuania, Latvia and Estonia) and the Caucasus region (Georgia and the Ukraine). With all eyes on China, and the U.S. distracted in Iraq, expect Mr. Putin�s hand picked successor (Alexander Medvedev), like his predecessor in 1979, to test the resolve of the west in 2008, with more than just words.

In the middle east, Hezbollah will use 2008 to rebuild its strength. Russia will strengthen its alignment with Iran. And, Israel will hold on again and off again peace talks with the Palestinians. In the end, you can expect continuing conflict and tension in the middle east; it has been that way since the beginning of recorded history and I see no reason why things will change in 2008.

To summarize, in 2008 expect:

-Inflation to pick up steam and become headline news
-Oil prices to stay high - at some point gas to sell for $4.00 a gallon
-The price of gold to breach $900 dollars an ounce
-The housing market to be a drag on the economy
-The largest transfer of wealth in the history of mankind to continue - U.S. to China
-Russia to test the west�s resolve in the Baltics and/or the Caucasus
-Tensions in the middle east to continue
-The U.S. dollar to hit 70 on the USD index
-The new U.S. president to exhibit a distinct shift in presidential tone, policy and leadership style

And Paris Hilton . . . will she end up back in jail? I'll leave those predications to the supermarket tabloids!

Enjoy 2008, it’s going to be one for the history books!

Disclaimer: The above is a matter of opinion and is not intended as investment advice.

Contact Information
Robert Ross
San Diego, CA USA
Email